PreMarket Prep Stock Of The Day: American Airlines Takes Off On Earnings

During an earnings season, it's always important to pay attention to the reports and price action of the major companies that are the first to announce in a sector. The reason is that it sets a high or low bar for the others and could be a good indication of how the latter ones will do.

That's certainly the case with American Airlines Group Inc. AAL, which is the PreMarket Prep Stock Of The Day.

Leading Indicator: Last week Delta Airlines Inc. DAL kicked off earnings season with a good report. The company reported quarterly losses of $1.23 per share, which beat the analyst consensus estimate by 14 cents. The fact that it came on lower operating income, Q1 adjusted operating revenue was $8.2 billion vs. $8.76 billion estimates did not seem to matter to the Street.

That instigated a major rally not only in the shares of Delta but for the entire airline sector.

In that session, Delta rallied from $38.62 to $41.02. That same day, American Airlines rallied from $17.13 to $18.86 and ended Wednesday’s session at $19.48.

Q1 Beat: Before today's open, American Airlines reported quarterly losses of $2.32 per share, which beat the analyst consensus estimate by 8 cents. Unlike Delta, the company reported quarterly sales of $8.9 billion, which beat the analyst consensus estimate of $8.83 billion.

In addition, the company announced much higher than previously estimated Q2 sales guidance.

PreMarket Prep Take: When the issue was being covered on the show, it was trading at the $21.50 area, higher by $2, and already established its premarket high of $21.90. Co-host Dennis Dick was impressed with the rally and participated in some short-term trades to the long side, but was not willing to go long at these elevated levels now: “Let’s see how it trades after the open.”

The author of this article analyzed the issue from a longer-term perspective and emphasized the importance of the $22 handle, which was just above the premarket high. For the robust rally to continue, the issue with multiple monthly highs from last fall in the $22.08-$22.35 area.

Price Action: After a much higher open ($21.26 vs. $19.48), it rallied another $0.17 to $21.42 and reversed course. The ensuing decline found support just above the top of Wednesday’s range ($20.07); shares closed at $20.22, a 3.8% gain.

The discussion on the issue from Thursday’s show can be found here: